Ex-Goldman Trader’s Bitcoin Exchange to Fill Mt. Gox Void

When Kano, 38, left his job as a derivatives and
convertible bonds trader in December, bitcoin had climbed to a
record $1,151. Three months later, it was worth half that after
a $530 million heist at Tokyo-based Mt. Gox bankrupted what was
once the virtual currency’s largest exchange.

“That’s one less competitor for us, but it also left many
Japanese with a very negative impression of bitcoin,” Kano said
in an interview in Tokyo on July 17. “We already had a company
then and felt it was up to us to rebuild the trust.”

Since Mt. Gox closed in February, acquiring the digital
currency in Japan meant going to the city’s only bitcoin ATM
machine or arranging a person-to-person deal. Kano’s bitFlyer
website allows anyone with a Japanese bank account to buy and
sell the coins. The service began in April and eschews the
trading options used by other exchanges in favor of a simple
interface that would appeal to beginners, Kano said, declining
to give subscriber numbers.

While Mt. Gox, operated by a Frenchman residing in Tokyo,
catered mostly to foreigners, its bankruptcy was widely covered
by domestic media. That has tended to scare off Japanese
individuals, who Kano says are already averse to risks. Not so
the nation’s government. The ruling Liberal Democratic Party has
taken a hands-off approach to the virtual currency which it sees
aiding Prime Minister Shinzo Abe’s push to spur venture funding
for innovation, a June report by the LDP’s special committee on
IT strategy shows.

Game Over

Kano raised 160 million yen ($1.6 million) from a Japanese
venture capital firm to start bitFlyer in what he says was the
country’s biggest investment in bitcoin to date. He is now
seeking to raise cash from an overseas fund so the company can
offer the service outside of Japan by year-end, he said.

“If we have another fiasco like Mt. Gox, it’s game over,”
Kano said, speaking in his company’s sparsely-furnished, glass-walled office a few blocks away from the Japanese parliament.
“There needs to be monitoring to prevent that from happening.”

Kano’s company is also seeking to set security standards
and personal identification guidelines for bitcoin trading in
the Asian nation, through the Japan Authority of Digital Asset,
which groups bitFlyer with CoinPass and the Japanese unit of
Kraken, a San Francisco-based exchange.

Mt. Gox Vacuum

Trading of the digital currency may expand as new entrants
seek to take advantage of the vacuum left by Mt. Gox. BitOcean,
a Chinese startup, joined with New York-based Atlas ATS Inc. to
bid for the assets of the defunct exchange operator and the two
companies plan to start a bitcoin platform in Japan by August,
Nan Xiaoning, the Beijing-based founder and chief executive
officer of BitOcean, said in an interview on July 15.

Kraken is also planning a Japanese-language website for
bitcoin-yen trading, Chief Executive Officer Jesse Powell said
in an interview with Kyodo News in March. The exchange currently
accepts dollars, euro and the Korean won.

Bitcoin fetched $618.71 or 459.45 per euro as of 9:13 a.m.
in Tokyo today, according to CoinDesk Bitcoin Price Index.

Unlike most of its rivals, which link buyers and sellers
together, bitFlyer is the counterparty for either transaction,
Kano said. That allows for deals to be concluded instantaneously
and without complicated price-setting mechanisms that can be
off-putting to newcomers, he said.

“That’s a major advantage we have over other exchanges,
but it also means we take on the risk,” he said. “Controlling
that risk is something you can’t do without experience.”

Kano first joined Goldman Sachs in 2001 after graduating
from Tokyo University with a Master’s degree in fluid dynamics.
The branch of physics studying movement of liquids and gases
gave Kano an appreciation for complex systems and the
programming skills needed to simulate them, he said.

After 3 1/2 years as an analyst he left to join BNP Paribas
SA to learn how to trade. His second stint at Goldman Sachs
lasted 6 1/2 years.

“There is no stability in working for Goldman and doing
something on my own has a greater upside,” Kano said. “I like
complex systems, that’s why I became a derivatives trader. Now
it’s bitcoin.”

(An earlier version of this story was corrected to show
Kraken accepts euro.)